Originally published by AxiTrader
Back on the April 20 I highlighted that - based on my system - USD/JPY showed signs of a turn and that a break of 109.17 would trigger me long.
Since then we've had the gap open on Monday, consolidation and then big surge again last night with USD/JPY putting in an outside day which has taken it to 111.04 as I write this morning.
That means prices are now at a level where this dollar-yen rally faces its first significant hurdle.
That hurdle - 111.55/65 - represents the bottom of the trading range USD/JPY occupied between late December 2016 and late March this year. We've already seen one false break back inside the range soon after the initial break lower. This level was then retested a few days later.
So it's clear traders had their eye on it previously and will likely be watching it again.
My daily charts suggest this rally has legs and a move toward 112.00/20 is on the cards.
But the 4-hour charts show USD/JPY to be in overbought territory and suggest this level of overhead resistance and previous range bottom should cap any move over the next 24 hours.
Indeed the 4-hour charts suggest a move back toward 110.35/50.
Looking out a day the BoJ meeting tomorrow and the announcement on policy could be interesting. Though no change is expected it is worth noting that yesterday BoJ governor Kuropda said he expects Japanese CPI to pick up toward 2% while his deputy Mr Iwata actually said the BoJ is conducting a simulation on its exit strategy.
Any change will see my stop on this long hit as it would likely see Yen buying and USDJPY selling. But I'm not expecting any change just yet.
Have a great day's trading.